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IRS Simplifies Procedures for Electing Tax Deferral on Canadian Retirement Plan Accrued Income

The IRS recently issued Revenue Procedure 2014-55, which simplifies the reporting obligation and method to obtain the deferral of U.S. taxation on interests held by U.S. taxpayers in Canadian Registered Retirement Savings Plans (“RRSPs”) and Registered Retirement Income Funds (“RRIFs”). Previously, to defer U.S. taxation on income accruing in their RRSPs and RRIFs to the date of distribution, U.S. taxpayers were required to file Form 8891 with the IRS, which many taxpayers failed to do. The IRS has eliminated Form 8891, as well as the requirement that taxpayers file this form for future and most prior tax years. U.S. taxpayers may generally qualify for favorable tax treatment under the Revenue Procedure so long as they continue to file U.S. tax returns for any year in which they hold an interest in a RRSP or RRIF and include any distributions as income on their U.S. tax returns. A copy of the… Continue Reading

Employer Provided Parking Can Be Taxable Employee Benefit

In Information Letter 2014-17, the IRS reminds employers that the amount that the fair market value of employer-provided parking exceeds the amount (i) paid by the employee for the parking, if any, plus (ii) the amount excludible from income as “qualified parking,” is subject to income and employment taxes and withholding. For 2014, the amount excludible for qualified parking is $250 per month. Generally, qualified parking is parking provided by the employer on or near its premises. An employer is considered to provide parking if the employer pays for it (either directly or by reimbursing the employee) or provides it on property owned or leased by the employer. A copy of the Information Letter is available here.

EEOC Files Second Wellness Program Lawsuit Against an Employer

The U.S. Equal Employment Opportunity Commission (“EEOC”) sued an employer claiming it violated the Americans with Disabilities Act (“ADA”) when the employer cancelled coverage and transferred 100% of the premium to the employee for failing to complete biometric screening and a health risk assessment. Employees who completed the screening were charged only 25% of the premium. This lawsuit follows the EEOC’s ADA lawsuit earlier this year against a different employer that terminated an employee for failing to participate in the employer’s wellness program. The EEOC has taken the position that wellness programs must be voluntary and cannot compel participation by cancelling coverage or imposing onerous penalties. The EEOC’s Press Release can be found here.

Final Regulations Issued on Exemption for Limited-Scope Dental/Vision Benefits and EAPs

Final regulations issued by the Departments of Treasury, Labor, and Health and Human Services modify the excepted benefit exemption for limited-scope vision and dental benefits, as well as employee assistance programs (“EAPs”). Consistent with the proposed regulations issued in December 2013, the final regulations add an exemption for standalone limited-scope dental or vision coverage and coverage for long-term care that otherwise are not “an integral part” of the employer’s group health plan. Coverage that satisfies the exemption is not subject to some of the requirements imposed by the Health Insurance Portability and Accountability Act (HIPAA) and the Patient Protection and Affordable Care Act (PPACA). Consistent with the proposed regulations, the final regulations eliminate the additional employee contribution requirement for a self-insured limited-scope dental or vision plan to be considered an excepted benefit and provide that EAPs must satisfy four requirements to be considered excepted benefits. The final regulations are available… Continue Reading

CMS FAQ: Insurer is Required to Obtain HPID for Fully Insured Health Plan

The Centers for Medicare & Medicaid Services (“CMS”) issued a FAQ and quick reference guide outlining the process for a health plan to obtain a health plan identifier (“HPID”). Among its guidance, CMS explains that for fully-insured plans, the insurer is treated as offering a controlling health plan (“CHP”) and thus must obtain the HPID. The individual employer plans are sub health plans (“SHPs”) to the fully-insured CHPs. The SHPs may obtain HPIDs, but are not required to. The CMS FAQ can be found here. The CMS quick reference guide can be found here.

Texas Supreme Court Holds Former ExxonMobil Executive Forfeited Restricted Stock

In the case of Exxon Mobil Corp. v. Drennen, the Texas Supreme Court held that New York law could be applied to determine the enforceability of a forfeiture provision contained in an executive compensation agreement between a Texas-based corporation and a Texas employee. A vice president of ExxonMobil had received restricted stock under an incentive plan, which included a New York choice of law provision. After he took a position with a competitor, ExxonMobil cancelled all of his outstanding shares of restricted stock, pursuant to a clause in the incentive plan which provided that outstanding shares would be forfeited if the executive engaged in “detrimental activity,” such as becoming employed by a competitor. The executive sued to recover the forfeited shares. Following judgment in favor of ExxonMobil at the trial court, the court of appeals reversed, holding that the choice of law provision was unenforceable because applying New York law… Continue Reading

October 15 Deadline to Notify Medicare-Eligible Participants of Creditable Coverage

Employers whose policies include prescription drug coverage must notify Medicare eligible policyholders as to whether their prescription drug coverage is creditable coverage prior to October 15 of each year.  Model notice documents are available on the CMS website here.

IRS Releases Guidance on Qualified Retirement Plan Distributions

The IRS released proposed regulations that nullify the rule regarding allocation of amounts distributed out of designated Roth accounts to multiple destinations. Under the current rule, a distribution from a designated Roth account in a direct rollover is treated as a separate distribution from any amount paid directly to the participant. The proposed regulations eliminate this rule for distributions made on or after January 1, 2015 (or on an earlier date chosen by the participant that is on or after September 18, 2014). The proposed regulations were issued concurrently with Notice 2014-54, which permits plan participants to allocate after-tax and pre-tax amounts among multiple destinations when the funds are simultaneously dispersed from a qualified retirement plan.  The proposed regulations can be found here.  A copy of IRS Notice 2014-54 is available here.

New Regulations Regarding Hybrid Defined Benefit Plans

Final regulations were issued relating to defined benefit plans that use a lump-sum based benefit formula, including cash balance plans, pension equity plans, and other hybrid retirement plans. The regulations provide guidance with respect to certain issues regarding minimum vesting standards and accrual requirements that were not addressed in the 2010 regulations and make certain changes to such requirements. Such changes include extending the relief provided to pension equity plans to include a benefit formula that is expressed as a current single-sum dollar amount equal to a percentage of the participant’s highest average compensation. A hybrid plan satisfies the prohibition on age discrimination only if the plan does not credit interest at a rate that is greater than a market rate of return. One notable change includes expanding the list of rates that satisfy this market rate of return requirement and allowing for the list of permitted rates to be… Continue Reading

Proposed Regulations Regarding Hybrid Defined Benefit Plans Offer Transition Relief

As discussed above, the final regulations provided additional guidance on the requirement that a hybrid defined benefit plan not provide for interest credits at an effective rate that is greater than a market rate of return. Proposed regulations were also issued that permit a hybrid defined benefit plan that does not currently satisfy this requirement to satisfy the requirement by changing the specific portions of interest crediting rates that are not consistent with the final regulations to permitted interest crediting rates without violating the anti-cutback rules under ERISA. Comments on the proposed regulations must be received by December 18, 2014, and a public hearing is scheduled for January 9, 2015.  The proposed regulations can be found here.

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